10 Financial Terms You Should Know For Next Year

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

A challenge that many people often face when it comes to their finances is that they don't understand some of the complex terms that tend to be used in certain conversations. And since not having the knowledge surrounding the language used in this industry can have adverse effects on your financial success, there is no better time than now to learn a few. Below, we hope to eliminate any confusion you might have by outlining 10 of the most important financial terms we think you should know.

Asset Allocation: Asset allocation refers to the process of re-positioning the assets in your portfolio to really maximize the potential return that comes with a certain level of risk. Although it does not guarantee there will be no loss, it is used to help manage your overall risk when it comes to each of your investments.

Diversification: Diversification means investing in different companies, asset classes or industries to minimize your overall risk. While this also does not guarantee against loss, it certainly helps to manage your investment risk.

Estate Tax: An estate tax is the tax placed on the value of the estate left by a deceased decendent. This tax is given by the federal and state governments, and there are usually some limitations involved.

Fixed Income: Fixed income is the income you receive from investments like CDs and pension benefits; it is income that is the same from month to month.

Gift Tax: Gift taxes are federal taxes that are imposed on property that is transferred as a gift. Usually paid by the donor, the first $14,000 gifted each year is considered to be exempt from this tax. For more information about gifting, please click here.

Inflation: Inflation is the increase in price of a product or service over time. In order to measure inflation, the government uses the Consumer Price Index.

Liquidity: Liquidity refers to how quickly and easily assets can be turned into cash.

Probate: When a decendent passes, probate is a process used by the court to handle their estate. Ultimately, it is the process in which the deceased's estate is settled and distributed.

Roth IRA: A Roth IRA is another account that can be used to save for retirement. This type of savings plan, which is a nondeductible IRA, permits tax-free withdrawals so long as certain conditions are met.

Volatility: Volatility is best defined as the range of price swings of a security or market over time.

Aside from these terms, are there others that you hear time and time again that you are unsure of? To learn the definitions for several other popular financial terms, be sure to check out our online glossary here. Of course, if you have any other specific questions, you can contact us at (516) 932-5130; our team would love to sit down with you and speak about several financial planning processes.